The struggling cell phone producer Nokia has suffered yet another blow on Wednesday as the company abandoned its plans to sell a stake in its network gear venture with Siemens. The shares of Nokia, which have dropped by more than half in price since February this year as the Finnish giant fights hard in attempts to restore its lost sheen and reverse the market share losses it has suffered to nimbler rivals, dropped below 4 euros and to the lowest levels since January 1998.
The world’s second largest manufacturer of wireless networking gear, Nokia Siemens Networks, has been struggling to show profits since it was formed in 2007 as it was hit by the falling spending of operators and the price cuts from the leaders of the market, Sony Ericsson, and its Chinese rivals Huawei and ZTE.
Both the parent companies of the network have written down the values of their holdings in the Nokia Siemens Network, the equity of which has been valued at 7 to 8 billion euros by Bernstein Research. According to analysts, a private equity option for NSN, which was turned down by both Nokia and Siemens, had likely valued the venture much below that figure.
NSN’s operations have improved during the 12 month of talks with private equity on a sale, helped because of a boom in new network gear. An analyst named Paolo Pescatore from the research firm CCS Insight said that this decision from the parent companies of the network looks sensible given that NSN is starting to turn its fortunes around.
When the venture reports on the 21st of July, it is expected to report an underlying operating profit of $107.3 million, which is more than the Nokia phone unit, on sales of 3.4 billion for the April to June quarter. NSN released a statement saying that it plans to further improve the competitiveness of the company as a standalone entity. Thousands of jobs have been cut by it since it started its operations in 2007.
Both the parent companies released a statement reaffirming their commitment to the venture; however a spokesman for Siemens said that the German company is still looking to exit the venture at some point or the other. Siemens has been reported to be looking for an exit from the venture since Peter Loescher took over as the chief executive of the company shortly after the launch of the NSN.
